Which? Mortgage Clinic

As a first time buyer, understanding mortgage terminology and knowing what mortgage is right for you can be difficult, so David Blake at Which? Mortgage Advisers has joined up with First Time Buyer to answer your mortgage-related questions

Q Are there special mortgages for the self-employed?

A One of the misconceptions about the mortgage market is that it can be difficult for the self-employed to get a mortgage, in order to buy a home.

The reality is that most lenders offer the same products to self-employed applicants as they do to the employee.

Typically, the mortgage lender will require you to have at least two years’ worth of company accounts, SA302s, or tax returns. If you are self-employed as a contractor, you may also have to provide evidence of work you have already lined up for the future, in order to show that your current levels of income can be maintained.

Additionally, there are some lenders who offer specific mortgages to those who are self-employed, or on a fixed term contract.

The assessment of self-employed and contracting applicants is an area of the market that has seen lots of positive change. Usually, if the case makes sense and clients have a track record of experience in their respective industries, there are lenders who will consider an application.

Q Can I still get a mortgage if I have a low credit score?

A Even if you have a low credit score, you should still be able to get a mortgage. However, you might need a larger deposit. It usually depends on the reason why your credit score is low.
Mortgage lenders are more wary of lending to people who have a track record of missing payments on a regular basis. For people that have missed one or two payments, especially if missed a few years ago, there are lenders who will be prepared to overlook it. As long as defaults or missed payments happened over three years ago, there are usually options for potential borrowers. However, your application will need to be backed up by evidence of your income, level of expenditure, and the affordability of a mortgage.

It is still possible to get a 95% mortgage without having a perfect credit history and there are also options for people that have very poor credit history, such as credit repair mortgages.

Both of these options could incur increased monthly mortgage repayments, so ensure you are fully aware before signing an agreement.

No matter what your situation and how bad you think it is, it’s also worth a phone call to an impartial and independent mortgage adviser, to put a plan in place to obtain a mortgage in the future.

Q What are the benefits and risks of buying with friends?

A With record highs for average house prices, buying with friends can be an attractive option for those looking to get on to the property ladder.

Buying with friends may increase your borrowing capacity, due to higher combined income and a larger deposit. Additionally, monthly outgoings and mortgage payments are likely to be less as you are sharing the costs.

The risks of buying with friends are generally linked to your ongoing relationship with the friends involved. You should consider what will happen in the future if one of you wants to move on, or if one of you loses your job.

All those involved must understand they are jointly and severely liable for the mortgage. You are not just responsible for paying half each.

Buying with friends can offer a unique opportunity to get on to the property ladder and to afford a larger property than you could otherwise afford. However, you should seek independent advice from an impartial mortgage adviser, ensuring you are fully informed before making any long-term financial decisions.

For further help and advice from Which? Mortgage Advisers, please visit which.co.uk/ftbmortgages, or call 0808 159 4852